EDIT- I wrote this this past weekend and then today Codere is up 63%. I’m not sure how the capitalization structure is going to shake out now.
so now i’m really just standing by… http://finance.yahoo.com/news/spains-codere-accepts-grace-period-204600194.html
apparently they got more time to figure out their “shit” so to speak. i think they had like 55M shares fully diluted outstanding and made like 300M euro’s a year in EBITDA so now their market cap is like $55M euro and their net debt is still like around a billion.. so the question is what is the post recap capitalization structure? i don’t know yet, but i might have just missed the bottom.
roughly costing like 60M for the equity right now and ebitda run rate is around 300M euros on a net debt of like a billion. even at 10% you’re p/LFCF is like 1x here. standing by for the easy money
i dont recommend either as investments, codere or telecom argentina, below is why, but basically it amounts to understanding what a company makes, and in these cases they make Argentina currency and that currency is being inflated at 25%+ and that rate is accelerating, although in 2015 apparently they might pull the plug on the idiots managing that currency at which point these things might be undervalued? but compounding the accelerating inflation until then sure might mean that 25% compounding is pricey.. not to mention the risk of nationalization and other hob-knob fool-hardy argentina problems, ha.
basically, Codere is being forced under, debt trades at 60 cents on the dollar and is recapping and the mothership equity owners have a put option that they used to finance their ownership. they are getting backdoored and the toilet bowl is being flushed.
usually ev/ebitda of 2.0x is cheap, but not in an environment of 25%+ inflation that is accelerating. i learned this the hard way when i was investing in CEDC.
http://seekingalpha.com/article/114871-cheers-to-the-zloty
basically, the country is run by idiots who do everything in their power to practically guarantee accelerating inflation, and i guess that the upside is that in 2015 you replace the baboons running the ship with people who suck less?
Kyle Bass kind of likes Argentina, and I don’t know where their debt is trading but I think he might be right here…
http://www.businessinsider.com/kyle-bass-on-argentina-inflation-highs-2013-9
that said, there is easier value to find and consider if you have less than $100M to play with.
$teo or telecom argentina is also trading at a TEV/OIBDA of like 1.9x right now, and is debt free as it has a net cash position…
anyway, EV/EBITDA of 2.0x apparently makes sense when you have inflation at 25%? I don’t know, I’ve not done the math, but Codere is growing revenues at the rate of inflation, but they are subject to a currency multiple adjustment of like 1.8x, which i think will continue to expand into the next two years, as the country is purposely underrporting inflation…
i would argue that in terms of visitable countries, argentina sounds like the one that is the hardest to do business in, i mean, there are obviously countries like north korea where business is impossible — and china where business is defined by what the locals can steal from foreigners and from each other while they hide all signs of warning and the show goes on.
but yeah, argentina, that’s a situation…. and people in the USA think we will have inflation/hyperinflation here, those people do not understand MMT/MMR. Same applies to Japan. Kyle Bass should take a lesson from Mike Norman or Cullen Roche, those two guys understand that stuff better than I ever will and sometimes Kyle Bass makes me shake my head — haha.
Argentina, where EV/EBITDA of 2.0x is fairly valued? Seems legit. I actually look at these businesses and think that there is something here if you want to go in and bet that in 2-3 years the currency situation will normalize as history suggests it might, but you never know in these situations, and inflation/hyperinflation is a positive reinforcing framework, and the people running the ship right now are in effect only accelerating it and their steps to “stop it” do the opposite and you know, i’m not sure if they are idiots or are genius. i mean, if they intend to do it, then power to them, and i just never know, but i do know that they are messing it all up, on purpose or not, the messing things up will continue until they are stopped by an external force because they appear powerless to stop sabotaging themselves.
these are my rambling thoughts, it’ll be interesting to see how my frame of reference changes as new facts are presented, maybe my bias will just be confirmed, but history has mucho evidence for me being wrong and learning things the hard way, ha. 🙂 cheers